February 1: Daily Contrarian Reads

The Folly Of Inflation Targeting And The Fed’s Massive, Failed “Stimulus”

Inflation has been “better” of late, of course, from the perspective of monetary officials who despise actual stable prices. Modern monetary theory assumes it is far more preferable to have a little inflation than to risk having none; the latter condition, policymakers assume, leaves the economy no room for error, meaning the risk of deflation and depression too high. Empirical evidence over the last few years, nearly a decade now, shows clearly the fallacies in the argument…..This data is consistent with BLS figures that show the same absence of acceleration in wages and earnings, completely contrary to what would be consistent with an unemployment rate at 5% and less. At just 3% nominally, it is at the lowest end of the historical spectrum, a condition usually found in recessions (apart from the Great “Recession”).

Mind The Charts—-Seven Indicators Of The Troubles Ahead

As we begin the New Year, Brad Lamensdorf (CEO of Lamensdorf Market Timing Report) notes that historic indicators are showing that market expectations are extremely optimistic. Valuation and sentiment indicators, for instance, are rivaling record highs. From a contrarian perspective, these record-high indicators are warning signals to watch out. We take these warning signs very seriously. Real time LIMTR subscribers received an alert advising them to re-short the 12 1/2% that was covered before the election, rebalancing exposure back to 50% short.

Americans Spend More Than They Earn For 9th Straight Month As Savings Rate Tumbles To 2015 Lows

Personal income growth disappointed in December, rising a less-than-expected 0.3% MoM. Of course, that did not stop Americans from spending as personal consumption rose 0.5% MoM in December. This is the 9th month in a row of higher annual spending growth than income growth…Sadly for all those hyping and hoping for wage growth – it is stagnant again.

Trump’s Next Immigration Move to Hit Closer to Home for Tech

Trump’s next steps could strike even closer to home: His administration has drafted an executive order aimed at overhauling the work-visa programs technology companies depend on to hire tens of thousands of employees each year.  If implemented, the reforms could shift the way American companies like Microsoft Corp., Amazon.com Inc. and Apple Inc. recruit talent and force wholesale changes at Indian companies such as Infosys Ltd. and Wipro Ltd. Businesses would have to try to hire American first and if they recruit foreign workers, priority would be given to the most highly paid…..The top recipients of the H-1B visas are outsourcers, primarily from India, who run the technology departments of large corporations with largely imported staff.

The Vampire Squid Is Back—-How Trump Got Goldmanized

Infusing Washington with Goldman alums isn’t exactly an original idea. Three of the last four presidents, including The Donald, have handed the wheel of the U.S. economy to ex-Goldmanites. But in true Trumpian style, after attacking Hillary Clinton for her Goldman ties, he wasn’t satisfied to do just that.  He had to do it bigger and better.  Unlike Bill Clinton and George W. Bush, just a sole Goldman figure lording it over economic policy wasn’t enough for him. Only two would do.

The Bubble In Everything Is At A Major Inflection Point

Historically-reliable valuation measures now approach those observed at the 2000 bubble peak. Yet even this comparison overlooks the fact that in 2000, the overvaluation featured a subset of very large-capitalization stocks that were breathtakingly overvalued, while most stocks were more reasonably valued (see Sizing Up the Bubble for details). In many ways, the current speculative episode is worse, because it has extended to virtually all risk-assets. To offer some idea of the precipice the market has reached, this chart shows the median price/revenue ratio of individual S&P 500 component stocks. This median now stands just over 2.45, easily the highest level in history. The longer-term norm for the S&P 500 price/revenue ratio is less than 1.0. Even a retreat to 1.3, which we’ve observed at many points even in recent cycles, would take the stock market to nearly half of present levels.

Condo Speculation Collapses Amidst Miami-Dade’s Glut

The lure: Buy a preconstruction condo from a developer in the early stages of development. The initial deposit is small, and in a booming market, the payoff big. Additional payments need to be made as the building progresses, but lenders are eager to lend as condo prices soar. Everyone is in nirvana. This bet has been hot in the condo construction boom around the country. But in Miami, the bet is now collapsing. And preconstruction condo flippers, the lucky ones that could sell their units at all, are bathing in a sea of red ink.

There Is A Better Solution Than Wasting Money On A Mexican Wall

The solution to really addressing the problem of illegal immigration, drug smuggling, and the threat of cross-border terrorism is clear: remove the welfare magnet that attracts so many to cross the border illegally, stop the 25 year US war in the Middle East, and end the drug war that incentivizes smugglers to cross the border.

Getting High—-A History Of Marijuana Through The Ages

This book,” as explained by the author, “looks at marijuana in the long view of world history. It asks who used it, how, and why…….Chasteen surveys the rise of marijuana use in the United States. Marijuana smoking began in the United States on the eve of World War I. Migrant workers from Mexico brought marijuana to Texas, California, the mining camps of the Rocky Mountain states, and eventually “into the industrializing cities of the upper Midwest.” Marijuana “appeared by 1920 among the black working class in New Orleans, a city in close merchant shipping contact with Mexico.” Chasteen highlights the connection between marijuana and jazz music, the Beat generation writers, the counterculture movement, and rock musicians. By 1930, marijuana had been prohibited by law in many states “with significant populations of Mexican descent.” On the federal level, it was a veteran Prohibition-enforcement agent, Harry Anslinger, who is almost single-handedly responsible for the demonization of marijuana in America. This in spite of a 1925 U.S. Army study that “found marijuana use to be relatively harmless.”

Obama Killed 16-Year Old American In Yemen—Trump Just Got His 8-Year Old Sister

Two weeks after the killing of Awlaki, a separate CIA drone strike in Yemen killed his 16-year-old American-born son, Abdulrahman, along with the boy’s 17-year-old cousin and several other innocent Yemenis. The U.S. eventually claimed that the boy was not their target but merely “collateral damage….In a hideous symbol of the bipartisan continuity of U.S. barbarism, Nasser al-Awlaki just lost another one of his young grandchildren to U.S. violence. On Sunday, the Navy’s SEAL Team 6, using armed Reaper drones for cover, carried out a commando raid on what it said was a compound harboring officials of Al Qaeda in the Arabian Peninsula. A statement issued by President Trump lamented the death of an American service member and several others who were wounded, but made no mention of any civilian deaths…..But reports from Yemen quickly surfaced that 30 people were killed, including 10 women and children. Among the dead: the 8-year-old granddaughter of Nasser al-Awlaki, Nawar, who was also the daughter of Anwar Awlaki.